Binhkhieu@gmail.

com

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Starting

Security analyst

Independent
Loan Officer
Auditor

Business

Corporate Management
manager consultant

THE ROLE OF
FINANCIAL REPORTING
IN CAPITAL MARKET
Financial statement a valuable

inside information

insights

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 THE ROLE OF FINANCIAL
REPORTING IN CAPITAL MARKET

!
Savings

Investment

Starting

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 Discussion 1
PREPARE
are responsible for acquiring physical and
financial resources from the firm’s environment
and using them to create value for the firm’s
investors. Value is created when the firm earns a
return on its investment in excess of the cost of
capital. Managers formulate business strategies
to achieve this goal, and they implement them
through business activities.
are influenced by its economic environment
and its own business strategy. The economic
environment includes the firm’s industry, its
input and output markets, and the
regulations under which the firm operates.
The firm’s business strategy determines how
the firm positions itself in its environment to
achieve a competitive advantage.
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Business activities

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 Discussion 2

Imagine you perform the following transactions in a month of business:

1. Sent out an invoice for $5,000 for a web design project

completed this month
2. Received a bill for $1,000 in developer fees for work done
this month
3. Paid $75 in fees for a bill you received last month
4. Received $1,000 from a client for a project that was
invoiced last month
Show the The effect on cash flow by Cash/Accrual Accounting concept

Feature 2: Accounting Conventions and Standards

Accrual accounting Investors view

deals with profits as a measure
expectations of of managers’
future cash performance
consequences of
current events

firm’s managers
incentives

appropriate distort
estimates reported profits
biased
assumptions

Therefore, the delegation of financial reporting decisions

intimate knowledge to corporate managers has both costs and benefits

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 Discussion 3

How the government/legislators can prevent

managers from manipulating
the accounting conventions to benefit themselves?

Feature 3: Managers’ Reporting Strategy

Real-world accounting systems leave

considerable room for managers to
influence financial statement data.
The mechanisms or
accounting regulation
cannot eliminate
managerial flexibility 14

completely

Firm’s reporting strategy

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 Self reading
Corporate managers can choose accounting and
disclosure policies that make it more or less difficult for
external users of financial reports to understand the
true economic picture of their businesses.
Accounting rules often provide a broad set of
alternatives from which managers can choose. Further,
managers are entrusted with making a range of
estimates in implementing these accounting policies.
Accounting regulations usually prescribe minimum
disclosure requirements, but they do not restrict
managers from voluntarily providing additional
disclosures.

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Feature 4:
Auditing
verification

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Discussion 4

Tan Tao Group

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Analysis Using Financial Statements

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Business Strategy Accounting Prospective

Financial analysis
Analysis analysis analysis

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 “
• Financial statements provide the most widely
available data on public corporations’ economic
activities; investors and other stakeholders rely on
them to assess the plans and performance of firms
and corporate managers.
• Financial analysts who understand managers’
disclosure strategies have an opportunity to create
inside information from public data, and they play a
valuable role in enabling outside parties to evaluate a
firm’s current and prospective performance.
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THA N K YOU

Neal Creative © Binhkhieu@gmail.com

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